According to naval analysts at AMI International, the Asian-Pacific region is currently the No. 2 market for naval arms sales globally. AMI estimates that Asian and Pacific nations will build upwards of 1,100 warships during the next 20 years, and spend $200 billion building them.

Military experts say that the Taiwanese Navy, once the island nation’s most neglected military service, has lately come to be viewed as “the most important” arm of the Taiwanese military because the Navy holds the power to save Taiwan from an invasion by mainland China. Accordingly, the Navy is now the focus of Taiwanese military investment.

Last month, Taiwan’s government released preliminary details on a new 20-year plan to modernize its Navy. Currently composed primarily of hand-me-down U.S. and French warships (Perry-, Knox-, and La Fayette-class frigates, and Kidd-class destroyers) and domestically-built supporting Kuang Hua 6 fast-attack missile boats and Ching Chiang-class missile patrol boats.

Taiwan plans to replace this current fleet with one that’s entirely domestically built, by relying on the combined efforts of its Ocean Industries Research and Development Center for design, the Taiwanese military-run Chungshan Institute of Science and Technology (CSIST) for systems and integration, and the Taiwan-based China Shipbuilding Industry Corp. for construction.

Producing them in Taiwan creates jobs and skills, reduces reliance on restrictive US government export policies, and reduces corruption, the Navy official said. US and European defense companies have a history of hiring local agents with ties to organized crime and Beijing’s intelligence apparatus.

Details of Taiwan’s naval modernization program will be released in November, but Navy officials provided some information about the scope of the massive build plan during the live-fire field training event during the annual Han Kuang exercises off the east coast of Taiwan on Sept. 17.

The fact that Taiwan wants to invest in developing its homegrown defense industry, and build these ships entirely at home, means there’s precious little opportunity for foreign defense contractors such as General Dynamics and Huntington Ingalls — America’s two biggest military shipbuilders — to participate in the project. The loss in revenues to U.S. defense contractors is estimated to be $6.9 billion — about a year’s worth of business for General Dynamics’ Marine Systems unit, or a year’s worth of revenues for all of Huntington Ingalls.

All is not lost.

While they might not get a chance to build Taiwan’s ships, they might very well be able to play a role in building the weapons and electronics systems that go into those ships.

Taiwan’s Ministry of National Defense is still open to the idea of hiring foreign defense contractors to provide “assistance on various components and systems” that will be installed in its new navy. Taiwan has shown particular interest, for example, in acquiring RIM-161 Standard Missile 3 anti-aircraft missiles built by Raytheon, to replace the Standard Missile 2s that currently outfit its Kidd-class destroyers (now dubbed “Kee Lung-class” destroyers).

The Taiwanese navy’s modernization program will face hurdles from budget declines in coming years. The military’s finances will also be put to the test as it reduces personnel and implements an all-volunteer force. (See “Taiwan military to be downsized and all-volunteer“)